What PSD3 and the New PSR Will Change
The EU payments framework is entering its next phase of reform. The European Commission published proposals for a Third Payment Services Directive (PSD3) and a new Payment Services Regulation (PSR) in June 2023, and the legislative process has continued to advance since, with the Council and European Parliament reaching negotiating positions during 2024 and 2025.
Why the Framework Is Being Updated
The European Commission’s review of PSD2 found that, while the directive succeeded in reducing fraud through measures such as Strong Customer Authentication, it fell short in other areas, including inconsistent application of open banking rules across Member States and persistent gaps in consumer protection against certain types of fraud.
A Regulation Alongside a Directive
Unlike PSD2, which was a directive requiring national transposition, the new framework splits requirements between PSD3, a directive focused on licensing and supervision of payment institutions, and the PSR, a directly applicable regulation covering the conduct rules and specific use cases for payment services, aimed at achieving more consistent application across the EU.
Key Themes Emerging From the Reform
Among the changes under discussion are streamlined licensing that folds electronic money institutions into a single payment institution category, expanded access to central bank payment systems for non-bank PSPs, enhanced fraud liability rules including for certain authorised push payment scams, and an extended Verification of Payee service applying across all credit transfers.
Timeline Considerations
Following the standard EU legislative process, Member States are typically granted an implementation period after adoption, meaning existing payment institutions and EMIs will have time to adjust, but should not wait until the framework is finalised to begin considering its likely impact on their business model and compliance arrangements.
Preparing Now
Firms currently licensed, or in the process of applying, in Cyprus should stay engaged with developments as the legislative package moves toward finalisation, and factor the direction of travel into medium-term compliance and product planning.
Enalian advises payment institutions, e-money institutions and fintech businesses on licensing, authorisation and ongoing regulatory compliance in Cyprus. If you are exploring a PSP or EMI licence, or need support with an existing authorisation, our team can help. Get in touch with our team to discuss your specific circumstances.
This article is provided for general informational purposes only and does not constitute legal, tax or regulatory advice. Regulatory requirements are subject to change; readers should seek specific advice on their circumstances before taking action.
